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Mr. Bernard Jenkin (North Essex): I thank the Secretary of State for his statement and for providing me with an advance copy, with the supporting documentation and the new chapter of the strategic defence review.

On Tuesday, the Prime Minister made it clear that the potential threat that Iraq poses is "enormous". At such a time, we should emphasise that far more unites Her Majesty's Government and the official Opposition than divides us. Whatever differences are aired between us this afternoon about the spending review and the new chapter, the House and the nation should bear in mind that we share the same dedication to basic democratic values, the same commitment to the war against terrorism and the same determination to face down dictators such as Saddam Hussein.

For a long time, we have said that the 1998 strategic defence review was underfunded. I therefore begin by welcoming the increased allocations for defence in the comprehensive spending review. However, we must put the increases in perspective. The Chancellor disingenuously claims a

The Secretary of State for Defence repeated that claim today, and I fear that Labour is up to its old tricks again. [Interruption.] The Chancellor said that on Monday. Labour Members should read Hansard, which I have checked.

The House of Commons Library confirms that, on the internationally accepted measure of defence cash spending—the traditional measure—the increase in real terms is only £1.2 billion for the three-year period. Before Labour Members crow that the years of decline have been

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ended, I point out that the Government will not only spend less in 2005 than last year—for understandable reasons, which reflect the extra costs of the war in Afghanistan—but they will spend less than the Conservative Government in their last year in office when my hon. Friend the Member for Mid-Sussex (Mr. Soames) and my right hon. Friend the Member for North-West Hampshire (Sir George Young) were Defence Ministers.

Defence spending as a proportion of gross national product will continue to fall from the 2.9 per cent. that Labour inherited from the Conservatives to 2.2 per cent. in 2005. That is well below the SDR target of 2.4 per cent. that Labour set in 1998. Are the days of overstretch and underfunding truly over? I doubt it. I share the Secretary of State's admiration for the people in the armed forces, but I hope that the Government will not continue to take them for granted.

There is much to welcome in the new chapter, not least the thoughtful doctrine that the armed forces have started to develop for the war against terrorism. It rightly goes far beyond the use of simple military force. I reiterate our welcome for the increase in aid spending, which is vital in the war against terrorism.

We welcome the Secretary of State's intention to spend more on digitising the battlefield and on support staff and headquarters. However, that must not be at the expense of front-line ground troops, who are always decisive. They proved that in Afghanistan, Sierra Leone, Kosovo, the Gulf and every serious military conflict in history. It would be dangerous for the Government to believe that our armed services can remain effective if they continue to reduce in size, however network-centric they become. Surely the Government have learned the lesson since 1998 that we need to put more boots on the ground. Although the Secretary of State has abandoned the 1998 manning targets for the armed forces and made a commitment to increasing the size of the Army, will he assure hon. Members that he has no plans to disband or merge regiments simply to make ends meet?

We have long harboured the suspicion that the Government will use under-recruiting as an excuse to scrap Scottish regiments such as the Black Watch and the Royal Scots Dragoon Guards. Will the Secretary of State spell out clearly what he meant when he said that an adjustment would probably be required to rebalance the force structure? When will he announce the detail of the review of force structures, which is likely to be far more controversial than his good news today?

In the coming weeks and months, we will study today's announcement and its implementation. The new chapter contains omissions, which worry us. Many European Governments and NATO, presumably supported by the Secretary of State, are already committed to the development of theatre missile defence systems. Where is the Government's much vaunted leadership in Europe on that? Even under the heading of force protection, the new chapter does not mention the missile threat. Why does not the document tackle the dispute between NATO and the European security and defence policy that is now in its fifth year?

Hon. Members should broadly welcome the Secretary of State's announcement today. However, I reiterate that the Government have so far failed to fund the defence capabilities that they promised in the 1998 strategic defence review. We must hold the Government to their

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commitments. The defence capabilities that are essential to safeguarding national security and fulfilling our international obligations must be fully funded. The next Conservative Government will do that.

Mr. Hoon: I am grateful for the hon. Gentleman's words of support at the beginning of his remarks. I am sorry that he did not see that through by studying more carefully my comments and those of the Chancellor. Let me deal with the hon. Gentleman's first whinge about the £3.5 billion. I clearly said that the defence budget will increase by £3.5 billion by 2005–06 compared with this year. The figure therefore applies to the CSR period. I did not claim anything else, and I am not aware that the Chancellor did so. The hon. Gentleman was responding to my statement and to avoid doubt, I emphasise that the £3.5 billion will be spent over the three years.

The figures have been published since Monday, and I am again a little disappointed in the research effort that the Conservative party puts into supporting the shadow Secretary of State for Defence. It has been found wanting, and not for the first time. If the hon. Gentleman wants to know the total cash increase, calculated on the previous basis, I shall provide the figures. In the first year, the increase is £700 million; in the second year, it is £972 million, and in the third year, it is £1,244 million.

Mr. Jenkin: Real terms?

Mr. Hoon: They are real-terms increases, after inflation has been taken into account. If I were one of the hon. Gentleman's researchers, I would be examining my terms and conditions of employment. They are simply not doing their job.

On the jibe about the percentage of GNP, the hon. Gentleman needs to consider more carefully the state of the economy at the time to which he referred and compare it with that today. In effect, he pointed out the success of the Labour Government in increasing economic growth and ensuring that we have more people in work and paying taxes than at any other time in the country's history. I therefore take his comments as implied congratulations on the success of my right hon. Friend the Chancellor's economic policies, which are allowing us to deliver on defence and the full range of public services.

The hon. Gentleman mentioned more boots on the ground. If he had read the strategic defence review carefully, he would know that the targets for manpower in the armed services were indicative. They change year on year, and that has always been the case. Perhaps he might consult some of the hon. Members behind him who have done a ministerial job in the Ministry of Defence. If he chooses to ask them, they will tell him that those figures for manpower targets change annually, according to the needs of the armed forces, and that Ministers do not have specific control over them. Indeed, that can be one of the frustrations of the job, as those issues are determined by military requirements set by the chiefs of staff. If he knew anything about it, he would see the that the same argument arises in relation to force structures, as the issues are constantly changing. If they did not do so, we would be left with the armed forces that we required at the end of the 19th century, never mind those that we require at the start of the 21st century. Of course, those changes will be announced to the House at an appropriate stage, but they are not significant. I assure

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him and the House that no substantial changes are involved in the size or organisation of our historic regiments.

Mr. Paul Keetch (Hereford): I, too, thank the Secretary of State for the advance copy of his statement and the White Paper and supporting documents.

At least between the Liberal Democrats and the Government, there is a great deal of cross-party consensus on the continuing relevance of the conclusions of the SDR and the broad balance of the forces that the UK requires. However, it is always necessary to make adjustments even to the best-laid plans, so we believe that our defence policy should always be regarded as work in progress. We support much of what the Secretary of State has announced today on special forces, reservists, intelligence gathering and unmanned air vehicles.

Does the Secretary of State agree, however, that the greatest threat to our forces is still the problem of retention? Several branches of our armed forces, such as the defence medical services, are chronically under strength. What part of what he announced today will help recruitment and cut the number of men and women leaving the services? It is easy to pay tribute to those personnel, as we do, but we must match those fine words with deeds.

Does the Secretary of State agree that much of the campaign against terrorism will be undertaken without recourse to B52s or Marines and will be fought by accountants and diplomats? Does he therefore agree that there might be a case for ensuring that a single Cabinet member is responsible in the UK for all aspects of defence against international terrorism?

Finally, the Secretary of State should be proud of the victory that he has achieved against the Treasury. It is not bad. I am not sure that it is excellent but, in short, the men and women of our armed forces will receive the statement with relief rather than rapture.

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